BlockBay Capital portfolio update June 2021

BlockBay Capital portfolio update June 2021

The portfolios achieved a negative return between -10% and -15% in June.

The relatively large position of the portfolio in Bitcoin reduced the loss at the portfolio level. Bitcoin’s price at the end of the second quarter (as of June 30) was $35,000. Compared to the high on April 14 ($64,000), the price of Bitcoin has fallen more than 45%. Since mid-May, Bitcoin’s price has been moving in the range of $30,000 and $40,000.

Crypto markets (and Bitcoin in particular) have suffered from renewed concerns about Bitcoin’s energy consumption and increased regulation. The concerns related to energy consumption have been fueled by Elon Musk and reinforced by the Chinese ban on cryptocurrency mining. The ban has a significant impact on the computing power of the Bitcoin network, approximately 50% of the computing power (from China) has now gone offline. A large part of the miners will be physically transferred to other countries with relatively favorable energy prices, such as Kazakhstan and the United States. It is therefore quite possible that the dip in computing power (and thus the security of the network) is temporary and will stabilize. At the same time, the mining transition will lead to less Chinese influences in Bitcoin. In the long run less Chinese centralization may be a possible positive side effect.

The recent decline of the total crypto markets (by 50%) means that prices are back on the long-term (rising) trend. The most recent Bitcoin price increases are relatively limited compared to the previous strong years for Bitcoin (2013 & 2017). The current macro environment (stimulating monetary policy, low interest rates and rising inflation) is still positive for ‘hard’ assets. Hard assets (unlike money) cannot be printed, such as shares, real estate, commodities and also a number of cryptocurrencies (such as Bitcoin). The high returns of these asset classes in the past period are at least partly driven by the fact that a lot of euros, dollars and yens have been printed by central banks.

The coming period will be volatile again. In addition to the post-corona developments, there are increasing developments within central banks with regard to issuing their own digital currency. There are concerns among governments about cryptos as an alternative to the current monopoly on money. Developments regarding a proprietary digital currency will increase, this will go hand in hand with the regulation of alternative cryptocurrencies (such as Bitcoin). A successful rollout of digital money by central banks is in principle only possible by using the current blockchains (such as Ethereum). Increasing use will certainly benefit early investors.